Chinese stocks rally on expectation of further easing

Monday, March 16, 2015

Chinese benchmark stock indices stood in stark contrast to their regional peers as mainland equities started the week on a strong footing. Both the Shanghai Composite and CSI 300 added over 2% during overnight trading, touching a fresh five year high in an otherwise unassuming session which saw other regional benchmarks pare back some of last week’s gains. Chinese investors were further encouraged by data released last week which showed that the looser monetary policy outlook initiated by the central bank had increased lending in February and could potentially spur banks to lend more. With risk appetite steadily improving, market participants expect the People’s Bank of China to offer additional monetary easing in an effort to further counter the slowing economic growth outlook.

Front month WTI futures faced considerable downward pressure last week with prices posting losses in four out of the five days as bearish oil fundamentals weighed heavily on near term futures. After an optimistic start to the week which saw WTI prices breach tentative resistance at the 50 day MA as it targeted levels above $50/bbl front month futures faced heavy selling pressure, erasing 10.6% over the next four session’s and ending the week just below $45/bbl after official EIA crude inventory data showed crude stocks increased for the ninth consecutive week, adding 4.5m barrels last week. Activity this morning has seen the US benchmark trade at a fresh year-to-date low, reaching $43.57/bbl early on as it looks to extend last week’s bearish run and we could see prices drift lower ahead of this week’s eagerly anticipated FOMC statement with investors keeping a close eye on any wording change from the previous statement.

Commodity prices struggled to gain any considerable upside momentum last week as a stronger USD pinned down any substantial recovery across the commodity complex. The LME base metals complex struggled to post any substantial gains throughout the previous week with three month copper and aluminium in particular limited on the upside by a stronger dollar. The dollar index closed above 100.00 for the first time since April 2003 as an increasing number of investors expected the Fed to offer further hints towards an interest rate rise in the coming months. Activity this morning has seen the dollar index slip back below 100, trading at 9.870 at the time of writing as investors switch focus to this week’s FOMC rates decision and accompanying press release.  

Front month WTI prices resume their path lower

CL1 Comdty Generic 1St CL Fut 2015 03 16 07 49 25

Gains in the dollar index limit upside for commodity markets

DXY Curncy DOLLAR INDEX SPOT 2015 03 16 07 59 58

Events for today




Rightmove House Prices




NY Fed Manufacturing




Industrial Production




NAHB Housing Market Index


Mar  Cocoa (NYBOT), Cocoa (LIFFE)

Topics: China, Crude oil, WTI, DXY, LME, PBOC
More from: Kash Kamal